Advances in Finance and Accounting

Industrial Engineering in Organizational Structure of Company

DAVID TUČEK
Department of Industrial Engineering and Information Systems
Tomas Bata University in Zlín
nám. T. G. Masaryka 5555, Zlín 760 01
CZECH REPUBLIC
tucek@fame.utb.cz

JAROSLAV DLABAČ
Department of Industrial Engineering and Information Systems
Tomas Bata University in Zlín
nám. T. G. Masaryka 5555, Zlín 760 01
CZECH REPUBLIC
Jaroslav.Dlabac@e-api.cz

Abstract: - This article dealt with industrial engineering from the perspective of its appropriate incorporation
into the organizational structure of a company. Industrial engineering is a relatively new multidisciplinary field
of study which combines technical knowledge of engineering disciplines with knowledge of corporate
governance. Industrial engineering strives for the most efficient use of the company resources (financial
resources, labour, information and skills of people themselves etc.). Its main task therefore is to rationalize,
optimize and improve both production and non-production processes. The aim of this paper was to reflect on
the position of industrial engineering in the organizational structure of a company, on job content of this
department, as well as on assessment and motivation of individual industrial engineers. In the end of the paper
the actual situation in Czech companies was outlined.

Key-Words: - Organizational structure, industrial engineering, LEAN, process improvement.

1 Introduction However, in order to enable full utilization of the

At first it is worth mentioning that missing box
named “industrial engineering” in the organizational
structure scheme does not necessarily mean that the
company does not intentionally pursue optimization
and process improvement. It may just mean that the
company simply names this department by some
alternative term which, however, is essentially
identical. Such terms as process engineering,
engineering, process improvement or Kaizen
department are used for the departments dealing
with industrial engineering too. Analogically,
employees working in industrial engineering are
then called process engineers, change managers,
lean managers, lean specialists, kaizen managers,
kaizen specialists etc.
In recent years industrial engineering has gained its
importance, as evidenced by the fact that in Czech
companies it is far from an unknown term.
Moreover, there are only few companies without
this department in their organizational structures. If
the companies omitted it, they would not effectively
take advantage of opportunities offered by IE.
potential of this discipline, one should keep in mind
several factors which could ultimately influence the
efficiency of industrial engineering in the company
in a significant way. The most important ones
include:
 position of this department in the
organizational structure
 job content of the department, its
responsibilities and authorities
 system of assessment of the department
performance [14].
2 Industrial Engineering (IE)–
definition, history of discipline, basics,
opinions on this discipline and its
classification, social capital framework
for IE
In context of system- intensive and human – centric
systems, we can count IE to the group: Human-
centered engineered systems. Kimbler [8] wrote

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 Advances in Finance and Accounting
this definition: This was the basis of our profession
at its origin, and, although the form of the study has
evolved, it is the basis of our profession today…. As
other engineers foster advances through innovative
new technologies, industrial engineers deal with
those technologies in their implementation and use.
But we can use in context of modern industrial
engineering methods some process-oriented cost
accounting, calculations and budgets and rates
costing (for example production salaries, machine
hours, production material etc.) [13].
Huges [7] described, that scholarship by historians
of science and technology suggest that the context,
case history, and historical narrative need to be
examined within the systems and networks
produced by social actors and their organizations;
conceptualizations of industrial engineering are
similarly produced. Pioneers in industrial
engineering came from a variety of backgrounds
including psychology, mathematics, engineering,
and management. It is necessary include the impact
of: Frederick Winslow Taylor, Charles Babbage,
Henry Robinson Towne, Henry Ford and Henry
Gantt, Frank Bunker Gilbreth and Lillian Gilbreth.
IE continues to explicitly include the connection
between people and technology as part of the
definition of the discipline said Bix [4].To
understand the basis and consequences of the
stereotype that industrial engineering is easy
discipline, we explored the foundation of how
disciplines have previously been classified in a
hierarchical sense. Specifically, the description of
industrial engineering as “Imaginary Engineering”
recalls the notion that the sciences can be classified
on a scale from “soft” to “hard.” A hierarchy of
disciplines was published over a century ago by
Auguste Comte [5], classifying disciplines focusing
on positivist approaches as “hard,” and by inference,
superior to other disciplines. Some works for
example works by Beyer and Gordon [3], and
Smith, Best, Stubbs, Johnston, and Archibald [10]
paralleled Comte’s conclusions and advanced the
measurement of “hardness” from an ordinal scale to
an interval scale. The trend toward refining the
measurement of “hardness” is an indication that it is
a widely accepted notion.
Two perceptions that Foor and Walden [6]
identified as separating industrial engineering from
other engineering disciplines were distance from
technology and a less rigorous curriculum. What
Foor and Walden call “distance from technology”
have strong parallels to themes in earlier research
ISBN: 978-1-61804-124-1
that would describe this distinction as “less likely to
use graphs,” “softer,” and “less positivist.” Murphy
et al. [9] in their study describes that IE is easier
than other engineering disciplines to a lack of
understanding of what IEs do. If industrial
engineering is stereotyped as easier than other
engineering disciplines, it is easier to marginalize
the discipline says Stevens, Amos, Garrison, &
Jocuns, because engineering has been found to
operate as a meritocracy of difficulty [11].In
deepening of analysis of the context of IE [2], some
of the findings in the literature cited above may be
related to the acquisition of “social capital.”
According to Stanton-Salazar and Dornbusch [12],
social capital refers to “a set of properties existing
within socially patterned associations among people
that, when activated, enable them to accomplish
their goals or to empower themselves in some
meaningful way”.
3 Position of the department in the
organizational structure
There are many various ways how the industrial
engineering department is incorporated into
organizational structures of Czech companies.
Probably the most common is to incorporate this
department under production. It is also often
incorporated under technology department,
technical preparation of production or under quality
department. However, we have also met a case
when the industrial engineering department comes
under logistics department, financial management
and audit or even under department of management
and maintenance of premises. Which arrangement is
the right? Where the industrial engineering
department should be incorporated? Apparently,
there is no unambiguous and generally accepted
answer to these questions. Its incorporation should
be always based on the strategy of the organization
and should reflect what the organization expects of
it and where the organization plans to direct its
activities. And this is often a stumbling block and
one of the main reasons of subsequent failures. Even
the company´s management themselves often have
no clear idea about activities of this department and
about strategy of its future development.
Consequently, ridiculous situations often come up,
when industrial engineers appear under asset
management or maintenance department. How such
situation occurs? The management simply have no
idea where to put an industrial engineer and
therefore they incorporate him/her under
organizational unit which is currently undersized or
under manager who is the most favourable to such
arrangement.
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Nevertheless, let us get back to the question of the
“optimal” incorporation of this department into the
organizational structure. We do not claim that
incorporation of industrial engineering under
production or technology department, which is the
most usual nowadays, must be naturally incorrect.
No doubt there exist companies for which this
position is suitable and possibly advantageous in
some measure. This happens in the case that the
main and primary objective of the department is
solely to improve processes in production or to
solve especially technical issues within the given
product group. Under these circumstances, this
incorporation is quite logical. However, one cannot
expect that the industrial engineer´s job content –
process optimization and improvement of
production and non-production processes – will be
met. Due to such incorporation, the field of activity
of an industrial engineer is significantly restricted,
especially as regards his/her competencies across
the company. Then it is nearly impossible for
him/her to deal with optimization of business
processes for example in the sales department, as
competencies of his/her team or of IE department
surely do not reach so far. In order to fully exploit
the potential offered by industrial engineering
through its activities, this department needs to be
completely independent and autonomous and must
be incorporated directly under director general.
In such case the head of industrial engineering
department becomes a part of the top management
of the company. He/she gains a unique opportunity
to influence efficiency across the entire
organizational structure. However, such
incorporation is conditioned by conviction, or better
said by inclination to optimize not only production
activities.
Picture 1: Example of an organizational structure [1]
3 Job content of the department, its
responsibilities and authorities
Work subject of the industrial engineering
department can be categorized from several points
of view. From the perspective of field of activity,
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activities of this department can be divided into:
 Improvement of processes in development
and pre-production stages
 Production processes improvement
 Non-production processes improvement
 Trainings and education of employees in a
field of processes improvement
3.1 Improvement of processes in
development and pre-production stages
As for this field, one cannot expect an industrial
engineer to design technical or structural design of a
new product. However, he/she may assist in
proposed solution opponency with regard to
subsequent problems and wastage in production,
potentially caused by this solution. In case that the
industrial engineer has the knowledge of innovative
methods, he/she can be in this stage also a very
useful moderator of workshop focused on products,
processes and technology innovation.
3.2 Production processes improvement
Improvement of production processes is probably
the most common job content of an industrial
engineer. It includes all activities associated with
optimization and standardization of production
processes.
3.3 Non - production processes improvement
Nowadays the field of non-production processes
becomes more and more popular. In this field the
industrial engineer most often plays a role of
moderator. Both internally and externally realized
projects can be in question.
3.4 Trainings and education of employees in
a field of processes improvement
Education and development of employees in a field
of processes improvement is very important and at
the same time very underrated domain. Entire lean
production rises and falls with the employees
themselves, which is something we often overlook
or do not want to realize. The industrial engineer´s
task is not only to methodically educate the
employees, but also to keep them sufficiently
informed about realized projects, gained results and
future strategy, and thus to motivate and integrate
them into the IE activities.
From the perspective of activities performed by
industrial engineers, the categorization can be as
follows:
 Realization of activities and minor projects. The
most of activities is performed directly by the
industrial engineering department. In general, this
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category includes especially visualization and
standardization of the processes which are
inevitable prerequisites for subsequent
improvement.
 Leadership of processes improvement projects of
complex nature. The industrial engineer plays a
role of project manager.
 Moderating of workshops aiming to improvement
of processes both in production and non-
production stages.
 Education and training of employees in a field of
processes improvement.
Job content of the industrial engineering
departments, or actually of the industrial engineers
themselves, certainly depends on the type of
organization where the activity is performed. As far
as the branch of an international company dealing
with assembling operations without its own
contribution into development is concerned, the
industrial engineer´s role in pre-production and
developmental stages is naturally minimized.
Instead, the industrial engineer will realize his/her
potential in the production start stage and in the
subsequent optimization of production processes.
Another factor with a significant impact on the job
content of this department is the technology used.
Industrial engineer´s job content in an engineering
company will be largely focused on the maximal
utilization of the machinery, and thus its overall
efficiency. It also relates a range of methods and
tools used, which will be predominately focused on
introduction, assessment and increasing of the OEE
(CEZ), Total Productive Maintenance or SMED
method – Single Minute Exchange of Dies and on
the related determination of an optimal run. On the
other hand, as far as purely assembling company is
concerned, the job content will be completely
different. Industrial engineering will aim to utilize
human resources as efficiently as possible and thus
naturally to setup appropriate work conditions.
There is an excellent probability that great accent
will be put on analysis and measurement of
performance, especially on predetermined motion
time systems (e.g. the MOST method – Maynard
Operation Sequence Technique), operations
balancing, material flows on a workplace, supplying
of an assembly with material and last but not least
on ergonomics.
4 Assessment of the industrial
engineering department performance
How to assess work efficiency of industrial
engineering department or of industrial engineer as
an individual? Some managers or companies owners
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have relatively clear answer to this question. The
profit yielded by an industrial manager to the
company should be at least ten times higher than
his/her monthly salary. This criterion for assessment
of industrial engineer´s performance seems to be
comprehensible. However, reality is often slightly
different and some issues regarding performance
assessment arise, especially in the following areas:
 corporate culture
It is necessary to realize that in case that corporate
culture is not sufficiently developed and industrial
engineer does not feel any other than financial
motivation, entire assessment of the department
performance may easily deteriorate to “play on
numbers”. And who else should master this “play on
numbers” better than the industrial engineer?
 job content of the department
Job content plays a big part. In case we want to steer
into pre-production stages, it is evidently irrelevant
to reward the industrial engineer´s work with a
proportion of savings realized in the current
production. Another thing we should bear in mind is
that this department´s work is not only about rough
figures and optimization proposals. Many times it is
much more complicated to press the suggestions at
employees themselves or in other departments.
Therefore, it is very important to master also so-
called soft skills, which are, however, a bit difficult
to incorporate into metrics of the department´s
performance assessment. Job content can be support
with Business Process Change Management, as we
define in our article [15].
 authorities and competencies
In this field are especially projects taking place
across several departments or even across the entire
company. Industrial engineering department is often
assessed negatively on some projects, although in
essence it did not have any competence to influence
them. This certainly relates to already mentioned
way of incorporation of the IE department into the
company´s organizational structure. In case that
industrial engineering department comes under
production, it has only very few competencies to
bring a lean administration project to successful
conclusion.
What proportion of salary should be conditioned by
meeting these objectives? We suppose that this
conditional part should be somewhere between 30%
and 40%. If the conditional part was lower, it might
not be motivating enough. On the other hand, if the
proportion of the conditional part of the salary was
higher, no space would remain for activities which
cannot be unambiguously transformed into
measurable objectives.
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Picture 2: Roles of an industrial engineer [own
authors].
5 The factual situation in Czech
companies
We have recently tried to carry out a minor survey
with the objective to map basic information about
departments dealing with processes improvement.
Approximately 20 Czech companies from various
industries were involved in the survey. Here we
state some examples of the survey questions:
 name of the organizational unit dealing with
processes improvement
 incorporation of this unit into the organizational
structure
 number of employees in this department in
relation to the total number of the company
employees
 job content of the department
 remuneration system for employees of the
department
5.1 Name of the organizational unit
dealing with processes improvement
The most commonly used name for this department
is Industrial Engineering, or Process Engineering,
occurring in more than 50% of companies (the
English version, Industrial Engineering, was
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included in this category as well). Such terms as
Processes Optimization, Technical Development or
Business Excellence occurred less, frequently.
5.2 Incorporation of this unit into the
organizational structure
Quite interesting finding is that this department
comes directly under director general or factory
manager only in three companies. In six companies
this department is under production and in four
companies it comes under technical manager.
Remaining 40% of companies use relatively
individual incorporation into their organizational
structures. The interesting ways of incorporation
include the industrial engineering department
coming under logistics and asset management.
5.3 Number of employees in this
department in relation to the total number of
the company employees
On average, each employee of this department
receives almost 250 company employees. Absolute
number of employees in this department ranged the
most frequently from 2 to 5. Probably the greatest
extreme was found out in a Moravian company
where nearly 1 000 employees receive only one
industrial engineer.
5.4 Job content of the department
This question aimed at the main subject of work and
at definition of another three most frequent
secondary activities. The most common job content
of the department or of the indust00rial engineer as
an individual was production processes
optimization. Only in three surveyed companies
industrial engineers deal also with improvement of
non-production processes. This department does not
participate in rationalization of pre-production
stages in any company. In the production field the
department most frequently deals with layouts and
assembling lines optimization or with monitoring
and increasing defined indicators – such as KPI,
CEZ etc. Another indispensable activity is training
of employees.
5.5 Remuneration system for employees
of the department
In vast majority of companies the remuneration
system is linked to objectives. The extent to which
these objectives are met is then transformed into
variable component of the salary. Only in three
companies the salary is completely independent of
meeting the objectives and thus has a nature of a
fixed component only. The objectives are usually
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linked to fulfilling the performance indicators and
work quality indicators, or to introduction of
production system elements. Only in two cases the
objectives are linked to fulfilling tasks and meeting
deadlines of concrete projects. Proportion of the
variable component of the salary ranges from 3% to
10% in 60% of the companies. Only in 15% of the
companies the IE employees´ variable component of
the salary exceeds 20%.
6 Conclusion
Finally, we can only add that besides knowing
methods and techniques of work rationalization and
processes optimization, industrial engineer also
needs to master soft skills, primarily
communication. Especially when taking into
account that for industrial engineer it is a must to
cooperate with colleagues across the organization
from the top structures to the ordinary employees.
That is why this skill needs to be developed too. It
should also be noted that thanks to knowledge of
production processes, as well as of supportive and
administrative processes, IE employee has a great
potential to rise within the organizational structure.
Important contributors to this potential are both
gained experiences and excellent knowledge of
individual processes from their basics, as well as
working on a project management basis.
Acknowledgments:
This paper is one of the research outputs of the
project “Metodika optimalizace montážních
pracovišť v českých podnicích” registered at
“IGA/FaME/2012/017”.
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